Muted market signals: politics, petroleum investments and regulatory developments in Tanzania

Abstract

This article contributes to an emergent literature identifying expectations and domestic politics as the drivers of change in Africa’s ‘new oil’-producing countries. Whereas much attention has been paid to weak institutions as an explanation for the resource curse that has marred Africa’s petroleum economies, the article points to the interplay between oil markets and domestic politics that is still under-researched. Based on empirical research into contractual and regulatory changes in mainland Tanzania, the article provides an overview of the development of the country’s petroleum sector and argues that for a new oil country it is a constant struggle to keep abreast of market signals. Changes to contractual and regulatory regimes therefore tend to come rather late in the price cycle, both when high global oil prices allow for tougher fiscal terms and when falling prices call for downward adjustments. This was the case historically and is no less the case in today’s resource nationalist environment, in which terms have been toughened despite falling global oil prices. Driven by electoral politics, decision-making has been politicized to such extent that exploration activities have come to an almost complete halt and no new contracts are being signed.